Michael Kavanaugh is an economist from Batavia, OH. Dr. Kavanaugh holds a Ph. D in economics from the University of Cincinnati (1975) and a B.A. in economics form Xavier University (1970). He has taught economics at the University of Cincinnati and at Northern Kentucky University. He has worked as a natural resource and environmental economist for a variety of clients, including the U.S. Department of Justice, the U.S. Environmental Protection Agency, environmental groups and private industry for over 20 years. He has been qualified as an expert in Federal court on financial and economic matter on a number of occasions. He is the economist credited by the D.C. Circuit in the Salazar case. His explanation of the advantages of the Adjusted Laffey Matrix are as follows:
The Laffey matrix was updated to 1988-1989 rates in connection with the Save Our Cumberland Mountains v. Hodel, 857 F.2d 1516 (D.C. Cir. 1988) (en banc) litigation. The Consumer Price Index for U.S. City Average, Legal Service Fees (“Legal Services Index”) maintained by the U.S. Department of Labor, Bureau of Labor Statistics is a better measure of the change in prices for legal services in Washington, D.C., than the Consumer Price Index for Washington, D.C., Maryland, Virginia, All Items (“DC Metro CPI”). He has reviewed both the update to the Laffey matrix which uses the Legal Services Index to bring 1988-1989 rates forward to present, and the update referred to as the United States Attorneys’ Office Laffey matrix, which utilizes the DC Metro CPI to bring 1981-1982 rated forward to present.
Both the Legal Services Index and the DC Metro CPI are readily available and are maintained by the U.S. Department of Labor, Bureau of Labor Statistics. The underlying data are collected by the U.S. Department of Commerce, Census Bureau as part of its quinquennial census and its annual surveys. Economists use as specific an index as possible to determine changes in prices in a part of an industry, such as here changes of prices in legal services in the Baltimore- Washington area. To measure changes in an industry’s prices, it is far preferable to use a specific index rather than a broad index.
The Legal Services Index is a national index that includes the metropolitan Baltimore- Washington, D.C., area. Adjusting the Laffey matrix with a national index assumes that the rate of change of prices for legal services is about the same everywhere. This is not the same thing as prices being the same everywhere. Even if prices differ in different places, the rate of change in prices is likely to be about the same. With resource mobility and the ability to communicate easily over distances, this is a plausible assumption. While it is possible for prices for the same good or service to change at different rates in different places, this is most likely to happen for goods or services for which there is only a local market because their transport is expensive relative to their value (e.g., fast food) or because communication is difficult.
The market for legal services in federal litigation in the Baltimore- Washington, D.C. area is not a local market. Therefore, it would be more appropriate to use the Legal Services Index, which captures supply and demand factors particular to the legal services market as well as inflation, as compared to the Baltimore-Washington Metro CPI, which chiefly captures inflation effects.
The Laffey matrix prepared by Dr. Kavanaugh is preferable to the United States Attorneys’ Office Laffey matrix for an additional reason. The Adjusted Laffey matrix updated is based on observations from 1988-1989, while the United States Attorneys’ Office Laffey matrix uses 1981-1982 rates as a base. In general, the more contemporary the observations, the less possibility exists for forecasting errors. Thus, the Adjusted Laffey matrix is more likely to be an accurate forecast of rates because it applies an index to more recent observations to bring rates forward to the present as contrasted to the United States Attorneys’ Office Laffey matrix which uses an index to bring forward much earlier observations.
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